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The fastest and most secure way to protect the watches you love.
We’ve minimized the paperwork and maximized protection, so you can stop worrying about your watches and focus on enjoying them.
In most cases, you’ll get a personalized quote in seconds and your policy kicks in immediately.
Wherever you are on planet Earth, your watches are protected. Rest easy and travel safely.
If you suffer a covered loss, there’s no deductible and no gimmicks. Ever.
Each of your watches is covered up to 150% of the insured value (up to the total value of the policy).
SELL OR TRADE
Our quotes are based on historical sales and real-time market data allowing us to give fair prices without all the hassle.
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The fastest and most secure way to protect the watches you love.
We’ve minimized the paperwork and maximized protection, so you can stop worrying about your watches and focus on enjoying them.
In most cases, you’ll get a personalized quote in seconds and your policy kicks in immediately.
Wherever you are on planet Earth, your watches are protected. Rest easy and travel safely.
If you suffer a covered loss, there’s no deductible and no gimmicks. Ever.
Each of your watches is covered up to 150% of the insured value (up to the total value of the policy).
SELL OR TRADE
Our quotes are based on historical sales and real-time market data allowing us to give fair prices without all the hassle.
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With Swiss exports there down for six consecutive months, the U.S. is poised to become Switzerland’s top export market.
Normally, the Swiss watch export data for September, released last week, would have triggered hearty high-fives among Swiss watch executives.
Exports rose 10.2% for the month versus the previous September. Ten of Switzerland’s top 11 markets reported increases, eight of them by double-digits. Of Switzerland’s top 30 markets, 22 were up.
But, as good as it was, there were few high-fives over the September export report. That’s because the one top-10 Swiss-watch market that fell was the most important one: Hong Kong.
Hong Kong is Switzerland’s largest watch export market, and the ongoing political turmoil there is clobbering Swiss-watch sales in the city. The 4.6% drop in Swiss watch exports in September marked six consecutive months of declines. For three of the past four months, Hong Kong fell to #2 behind the U.S. in the export rankings. Hong Kong has become a drag on global Swiss watch exports, which are up just 2.8% in value through September.
While global retailers are seeing increases, Hong Kong retailers are struggling.
The unexpected slump is raising increasing concerns at the highest levels of the Swiss watch industry. “This is not a blip,” the CEO of one of Switzerland’s best-selling luxury watch brands told HODINKEE the day the September data was released. “Every market has little ups and downs,” he said. “That’s not what this is.” He agreed with news reports from Hong Kong that there is no end in sight to the violent political demonstrations that have wracked the former British colony for 20 consecutive weeks.
Last week’s announcement by Hong Kong’s embattled Chief Executive, Carrie Lam, that the economy has fallen into recession was bound to spook the Swiss. The worry is that Hong Kong’s downturn could sabotage a Swiss watch recovery now in its third year.
Hong Kong is a massive watch market relative to its geographic size, with brands like Omega and Rolex have dozens of authorized retailers each.
That could happen. Tiny Hong Kong, with a population of 7 million people, tops the Swiss-watch sales charts primarily because it is a remarkable shopping Mecca. With its exotic locale, abundance of luxury-goods boutiques, and no sales tax, tourists from all over the world flock to it. (One sign of how Hong Kong punches above its weight economically is that in 2015 Rolex had 64 authorized retailers there and Omega had 52, according to a Geneva School of Business Administration study. Both firms have since trimmed their retail networks.)
The weekly political demonstrations are wreaking havoc on the city’s retailers. Bloomberg reported that tourism dropped 40% in August; retail sales were down a record 23%, with watches and jewelry particularly hard hit.
What’s more, Swiss memories are still fresh about the damage a Hong Kong slump can do to the watch business. In January 2015, Hong Kong fell into a severe slump: Swiss watch exports there dropped for 25 consecutive months. As a result, global watch exports fell 3% in 2015 and 10% in 2016. Then Hong Kong recovered, and the industry recovered: +3% in 2017, +6% in 2018.
However, it may not be the case this time that, as goes Hong Kong, so goes the Swiss watch industry.
Hong Kong was the big culprit in the 2015-2016 slump; exports there dropped 23% and 25% respectively. But other factors contributed. They included the steep appreciation of the Swiss franc; a corruption crackdown and economic slowdown in China; terrorist fears that hurt tourism in Europe; and weak Swiss watch sales in the U.S.
The big difference between then and now is that Switzerland’s #2 and #3 markets – the U.S. and China – were no help in the 2015-2016 slump. Both markets were in slumps themselves, although not nearly as severe as Hong Kong’s. Today both are much stronger. But are they strong enough to sustain a recovery through another prolonged downturn in Hong Kong?
Here are some things to watch as the Hong Kong drama unfolds.
Shoppers from mainland China continue to be the driving force behind the growth in Swiss watch sales. They account for the lion’s share of global Swiss watch sales. (Morgan Stanley estimates that Chinese nationals account for more than 40% of watch sales of the Swatch Group and Richemont.) While those shoppers are avoiding Hong Kong now, they continue to make purchases at home, around Asia, and in certain markets in Europe, where weak currencies offer bargains, like Great Britain.
Hong Kong punches above its weight economically: Rolex had 64 authorized retailers there in 2015; Omega had 52.
Through the first nine months of 2019, Swiss watch exports to Hong Kong were down 6%. But they were up 15% to China. (Full-year exports to China were down 3% and 5% respectively in 2015-2016.) Exports are also up year-to-date in top markets around Asia: +25% to Japan, +13% to Singapore, and +4% to South Korea.
They are up 16% to the UK, whose currency is weak due to Brexit tensions.
Luxury watch sales are growing in the United States, where sport watches and brands like Rolex are most popular.
Swiss watch exports to the U.S. dropped for three consecutive years between 2015 and 2017. But the U.S. is in recovery mode now, thanks mostly to a strong economy: exports rose in value by 8.2% in 2018, and were up 9% through September of this year.
Data from the NPD Group showing strong retail sales of luxury watches here, as we reported recently, confirms Swiss watch export data showing a Swiss watch recovery here. Should it continue, it will help mitigate the impact of the Hong Kong sales declines.
Will Hong Kong’s downturn sabotage a Swiss-watch recovery now in its third year?
The Swiss data also shows the U.S. poised to replace Hong Kong as Switzerland’s top export market should Hong Kong falter for long. Through the first nine months of this year, Hong Kong remains ahead of the U.S. as the top market by value by a solid CHF 328 million (CHF 2.07 billion vs. CHF 1.74 billion). But the trend is clear: the U.S. surpassed Hong Kong in exports in June, August and September.
It’s worth noting, as we did in HODINKEE Radio Episode 53, that over the past four decades Hong Kong and the U.S. have swapped the #1 export market crown four times: in 1982, 1988, 1998, and 2009. Since 1988, the two markets have swapped spots about every 10 years. History suggests the cycle is continuing right on time and the U.S. is about to regain the crown. We’ll see.
Richemont (which owns Cartier, IWC, and others) has been at the forefront of combating gray market sales through inventory buybacks.
In Hong Kong’s 2015-2016 slump, dealer watch inventories grew to alarming levels and led to a flood of goods on the gray market.
To clean up the market, Richemont famously decided to bite the bullet; it spent $305 million buying back that inventory – mostly Cartier watches – to keep it off the gray market.
Since then, Richemont has installed inventory controls to ensure that sell-in in Hong Kong and other major markets does not exceed sell-out.
Meanwhile, the Swatch Group announced this year that it has stepped up efforts to battle the gray market. It says it has spent at least CHF 100 million in the first half of 2019 on anti-gray-market efforts.
Hong Kong’s sudden slump will provide a test of how the industry’s two biggest watch groups, and the Swiss industry as a whole, deal with the inevitable rising levels of inventory there.
No one in Switzerland knows, of course, how long Hong Kong’s worst political crisis since its handover from Great Britain to China in 1997, will continue. Or if China, with the slowest economy in 27 years, can help the Swiss cause by keeping consumer spending strong. Or if the U.S., at what experts say is the tail-end of a record economic expansion, can do the same. Hanging in the balance is whether the Swiss watch industry’s growth forecast is thumbs up or down.
Add Hong Kong to the list of geopolitical/economic uncertainties (trade wars, yellow vest demonstrations in France, Brexit, economic slowdowns in China and Germany and more) that have clouded the economic picture for the Swiss watch industry all year.
By James stacey
By Jack forster
By Joe thompson
By Joe thompson
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